Kenya is in advanced talks with the World Bank for “a fairly priced” loan of up to 100 billion shillings ($991.57 million), nearly half of its required external funding this fiscal year, a senior Treasury official said on Friday. This is in line with the treasury’s plan to cut debt from overseas capital markets, after a borrowing spree in recent years, including Euro-bond offerings, a package of Chinese loans and syndicated commercial loans.
The World Bank, which has multiple development funding programs with Kenya worth billions, is seen as one of the viable alternatives to commercial debt. Last year, the world bank lent money straight to the ministry of finance for the first time, changing past practice where it channeled cash straight to the projects, bypassing the Treasury.
The size of the loan from the World Bank will be determined by how much its own funders can put together, said Julius Muia, the principal secretary in the ministry of finance.
“We are thinking something between 50-100 billion (shillings) depending on what kind of interest there will be, but is be cheaper than commercial debt,” he told Reuters.
The balance of the funds will be raised through Kenya’s first sovereign green bond, he said, with the country taking advantage of next week’s UK-Africa investment summit in London to gauge investor demand for the potential issue.
The Treasury projects that the budget deficit will shrink to 5.7% of GDP in 2020/21. The gap, which peaked at 9.1% of GDP in 2016/17 financial year, is expected to narrow further to the desired level of 3.3% in 2023/24.
